Sub folders to a Group Folder

On latest NC and Group Folders and getting an issue where a user that is part of a Group in a Group Folder renames a sub-folder to the main Group Folder and then all of a sudden the file is turned in to a file.

User 1
User 2
User 3

Group: Shares

Group Folder: Shares

The Group “Shares” is added to the Group Folder with all boxes ticketed and advanced permissions selected.

User 1 has been given advanced permissions for Read/Write/Create/Delete and User2/3 etc. have only Read selected and the rest denied.

However, if User 1 renames a sub-folder to the main Group Folder it “sometimes” changes the sub-folder in to a file…

Help…pretty please with sugar on top…

Can someone please shed some light?

See attached 2x folders that got renamed and not have turned in to an inaccessible file.

Help, please…!